What Is Bond Convexity: Explanation and Importance

By Kristi Waterworth – Updated Sep 10, 2025 at 12:30 PM

Key Points

Bond convexity measures price sensitivity to interest rate changes in the secondary market.
Positive convexity increases bond value as interest rates fall; negative does the opposite.
Understanding convexity helps decide on selling bonds before maturity based on rate trends.

Buying bonds can give you a solid source of fixed income over a long period of time, but you don't always have to hold those bonds for them to pay off. Sometimes, people trade bonds on the secondary market, and if you're thinking about doing that, metrics like bond convexity will come into play. Read on to learn more about this and how it works.

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The word Bonds with a green upward triangle on a digital screen. — Image source: Getty Images.

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Secondary Market

A market where traders buy and sell securities with each other rather than trading with the initial issuer on the primary market.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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